Thailand said that it will press on with a US$21 billion rice-purchase program, spurning a call from the International Monetary Fund to end the intervention and telling the Washington-based lender its approach is better.

"The government has our ways to help farmers," Finance Minister Kittiratt Na-Ranong told reporters in Bangkok on November 13 after the IMF released a macro-economic assessment of the country, known as an Article IV consultation. "We listened to different points of view but the IMF needs to profoundly understand the situation before giving theoretical comments," he said, adding that he hadn't yet read the report.

The third-largest shipper started buying rice from farmers at above-market rates in 2011 to shore up rural incomes, fulfilling a campaign pledge by the Pheu Thai Party, which won a parliamentary majority that year. The program spurred the buildup of record reserves and helped to dethrone the country as the largest exporter. The IMF said in the report that if left unchanged, it'll hurt confidence in public finances and generate further losses in Southeast Asia's second-largest economy.

"We cannot look at one side of the program, that it causes a fiscal burden," Deputy Commerce Minister Yanyong Phuangrach said on November 13. "The program actually helps to reduce farmer debt and spur domestic consumption."

The price of Thai 5 percent broken white rice, a benchmark grade for the staple for half the world, slumped 25 percent this year to $439 a ton. The grade touched $432 a ton in October, the lowest level since January 2008. The government has bought the crop at a maximum of 15,000 baht ($474) a ton.

Budgetary transfers

The government should replace the program with budgetary transfers targeted at low-income farm households, the IMF said in the report, which also highlighted the country's skillful macroeconomic management, strong fundamentals, high international reserves and moderate public debt. Changing the rice program will help reduce the fiscal deficit and ensure the country can meet its goal of a balanced budget by 2017, it said.

While the government has committed 410 billion baht to a so-called revolving fund to manage the rice-purchase program, it is unclear how losses will be contained within the size of the fund, the IMF said in the report.

"Uncertainty and lack of data concerning the rice paddy pledging scheme has eroded confidence in Thailand's public finance," the IMF said. "With the pledging prices about 40 percent above market prices, it is inevitable for the government to incur losses as long as the scheme remains unchanged."

Stockpiled grain

Thailand has spent 678 billion baht since October 2011 buying about 29 million tons of milled rice. Annual losses from the program after selling stockpiled grain will not exceed 200 billion baht, Commerce Minister Niwattumrong Boonsongpaisan said November 6. Former finance minister Pridiyathorn Devakula estimated losses over two years at as high as 425 billion baht.

The government's rice purchases will boost the country's reserves to a record 15.5 million tons in 2013-2014, according to an estimate from the US Department of Agriculture. India and Vietnam are the world's biggest rice exporters.

Thailand's stance should come as no surprise since the IMF, which always has a European chief, is still criticized by Asian leaders for its policy prescriptions during the Asian financial crisis in 1997 which are widely thought to have worsened it, and for its neoliberal policies which are increasingly questioned.